“In every century the same thing happens at one point or another. Society loses the plot and gets caught up in a mania, a grandiose exercise in self-delusion. It can be political, it can be religious, and yes it can be economic. Sometimes these manias are confined to regions or small groups of people, sometimes they are vast in reach and impact and have global consequences. We can all think of examples. Religious? How about witch burnings? Politics? How about Nazism? Economics? How about all the manias that had fervent believers and adherents that with the hindsight of time were completely insane? The South Sea Bubble, the Tulip mania, the 1929 mania, etc. All of these bringing about vast social instability versus the previous status quo with often disastrous consequences.”
“And whatever we got going here is now approaching a similar frantic delusion that appears to infect everyone. All of these manic periods have something in common: Believing in something absolutely even though it is either completely wrong or unrealistic. Seeing reality becoming untethered.”— Sven Henrich (https://www.zerohedge.com/markets/instability)
“In the midst of chaos, there is also opportunity”— Sun Tzu
Whew. That’s a relief. The election or whatever it was is finally over and most of us business folks can get back to work doing … but doing what? Doing what we have always done? Tinkering with the machine on its extremities? Embarking on major changes and rebuilding in some big bets?
What’s your plan? Is it along the lines of what I read so much today – “We gotta do something, anything …”? But is it the right thing?
On what basis are you moving ahead into the future? Changes are happening so quickly that the future is quite fluid to say the least. I have described this nebulous future as a flock of black swans since many of the changes occurring were not foreseeable and they had major impacts.
Who truly knows what even the near future is going to bring? Lots of guesses and wishes but which ones are you willing to bet your business on?
What is “reality” really?
Reality — how the world actually works rather than how we wish or imagine it works. To deal effectively with the real reality, we first have to figure out as best we can what that reality might be. This involves getting past our tendency to see a reality that is based on our hopes, wishes, and ideals. Real reality often bites.
But suppose that we are able to struggle successfully past our visions of what a good reality might be or should be and face dealing with the real reality – whatever it may be. Unfortunately today, figuring out just what is actually happening out there and where it might be headed is a really difficult task given that we seem to be living in a world of instability and unpredictability. Black swan times.
This is an experimental approach to learning about your actual reality.
But what if the real reality you are experiencing is simply a flock of black swans for some extended period? Big storm clouds ahead?
How can you manage a business in such an unknowable reality?
Step #1 in my mind is reinventing your business for surviving and prospering in such a background reality through resilience and agility. Step #2 is getting a handle as quickly as possible on what your unfolding local reality looks like.
Discovering your reality
Even black swans have to deal with a reality of some sort as they mess nastily with that reality. A new and improved pestilence black swan? History is full of these sort of times and here we are regardless. A major war breaking out somewhere most inconveniently? Lots of these in the history books as well.
One thing we do know about our reality is that it contains a never-ending series of black swan events and situations. Just like always.
You may not know ahead of time about what’s coming along but you can design your business to be resilient in almost anything less nasty that an asteroid hit like the one that messed up nearly everything in dinosaurville.
Designing a business for stability is not a good idea since stability is no longer available. It has been replaced by extended and serious instability.
I think that our background reality is black swan flocks. What remains to discover if possible is your own local reality that can be understood and managed to some degree if you are prepared.
Resilience and agility
Resilience as you all know is the ability to recover strongly from serious hits. These hits are coming along no matter what you do so your only course is to make your business seriously resilient. This can take a good deal of time and money.
This is where agility becomes essential. In a fast and unpredictably changing business environment, you must be able to move quickly and effectively. Planning becomes short term and responsive, just like on a battlefield.
The agile concept originating in software development offers a useful framework. Small teams tackling a need or problem that is understood in an evolving manner. Collaboration and simple communication in place of plans and meetings. I have written a bit about this here and here.
Taking advantage of a barely visible reality
You have available as a base the reality consisting of a series of unknowable black swan events and situations and your local, discoverable reality. The first you deal with by a combination of greater resilience and truly effective agility.
The second – your local reality – has to be systematically discovered by a carefully designed series of small steps, each followed by an assessment of what should have happened under your current local reality scenario.
Getting a reliable handle on your local reality is a daily management process. Your reality will be changing rapidly and mostly unpredictably as black swan events mess with it. The key here is to have a routine way to interpret responses to your small-step actions so as to build a reasonably solid picture of this fluid reality.
My favorite source of such reality testing is customers. Each customer will be reacting as best they can to their own local reality but their reactions are creating the reality you must deal with.
You might want to check out these related posts …
From post “Now Is the time to think small”:
“A focus on growth and cost reduction by management in largely stable, predictable times can lead to dangerous brittleness and business unit interdependence. These can be fatal in times of great change when a special kind of resilience is essential. This resilience involves making sure that the impact of any business unit failure cannot endanger the rest of the businesses. Restructure your big business into many small, largely independent and diverse units.”
“We seem to be living in black swan days. How can you manage a business when so much is happening that could not be foreseen and that is largely incomprehensible? The only answer that I can see lies in strengthening your business resilience – the ability to absorb and survive even the biggest hits.”
“Everything is changing. Today, you have a binary choice: to proactively reinvent your business, or to stand by reactively while change reinvents it for you. The latter may well prove fatal. A warzone analogy is useful here because the skills needed to win today are battlefield skills. You should know what these skills are.”
“Whatever is coming next is not foreseeable despite being termed the “New Normal”. It will surely be New but Normal? Not a chance. It will be very different and nothing like what most people expect. Business success in the New Whatever will require great organizational agility and adaptability. Does your business have what it takes?”
A two-part game plan for winning in your reality:
Integrating these ideas, you will quickly see a two-part game plan outlined:
- Part 1 is aimed at longer-range risk minimization and business protection using approaches that take longer to implement and involve substantial resources.
- Part 2 is aimed at discovering and taking advantage of your local, short-term realities as they emerge using a combination of small steps and results tracking.
Since you can’t reliably foresee anything long-term right now, the best you can do is to minimize the impact of whatever does come along. What you can manage to some extent is your local reality on a fairly short-term basis.
Harvard Business Review has an interesting take on dealing effectively with changing realities: “Adapt Your Business to the New Reality”. It suggests indirectly how you might go about developing scenarios for your business:
“The Covid-19 pandemic has severely disrupted global consumption, forcing (and permitting) people to unlearn old habits and adopt new ones. A study on habit formation suggests that the average time for a new habit to form is 66 days, with a minimum of 21 days. As of this writing, the lockdown has already lasted long enough in many countries to significantly change habits that had been the foundation of demand and supply.”
Jim Taylor in Psychology Today makes a clear distinction between perception – what we see or think we see – and an underlying actual reality: “Perception Is Not Reality: Just because you think something is reality doesn’t make it reality.”:
“We hear it all the time, in the business world, in the political arena, in marriages, anytime there is a disagreement or conflict: “Perception is reality.” This aphorism is often used to justify a perception that may be objectively unjustifiable or just plain out of touch with reality. It’s employed as a cudgel to beat others into accepting someone’s preferred so-called reality.”
“Here is a dictionary definition of perception: The way of regarding, understanding, or interpreting something; a mental impression.”
“And here is the dictionary definition of reality: The world or the state of things as they actually exist… existence that is absolute, self-sufficient, or objective, and not subject to human decisions or conventions.”
“Think of it this way. Perception acts as a lens through which we view reality. Our perceptions influence how we focus on, process, remember, interpret, understand, synthesize, decide about, and act on reality. In doing so, our tendency is to assume that how we perceive reality is an accurate representation of what reality truly is. But it’s not. The problem is that the lens through which we perceive is often warped in the first place by our genetic predispositions, past experiences, prior knowledge, emotions, preconceived notions, self-interest, and cognitive distortions.”
Greek philosopher Plato had this take on reality:
“Plato was a student of Socrates. Plato used Socrates as the protagonist of all but one of his dialogues. Socrates died for his beliefs. The Athenian government convicted him of heresy and corrupting the young, even though Socrates denied the charges. He was given the choice of leaving Athens forever and promising to never again teach his views to others or death by drinking hemlock. He chose death over living a life which would violate his beliefs. Socrates’ death had a tremendous impact on Plato.”
“Plato believed that true reality is not found through the senses. Phenomenon is that perception of an object which we recognize through our senses. Plato believed that phenomena are fragile and weak forms of reality. They do not represent an object’s true essence. The senses are not trustworthy. Plato believed that there was a higher realm of existence accessible only through using your intellect to go beyond your senses.”
“The universal forms exist in this higher realm. A universal is an abstract term or object which ranges over particular things, such as the concepts large, chair, and green. We can sense objects which exhibit these universals. Plato referred to universals as forms and believed that the forms were true reality. Through developing our intellect, we can attempt to gain greater understanding of reality. This helps us act in ways that are closer to the ideal.”
“Plato argues that the soul is a universal, pure, one substance, unchanging, immortal. The body is a compound substance, ever changing, and mortal. The body interferes with the soul’s ability to sense reality. Furthermore, this means that the soul must survive death and exist prior to birth, like any other universal. Our difficulty is being able to get beyond our sense so that we can realize this prior to the death of our bodies. The true philosopher should never fear death because the soul is freed from the handicap of the body and joins other invisible, pure, beings untainted by the body, able to bask in pure reality.”